Behavioural economics and your travel programme

Behavioural economics and corporate travel

Understanding behavioural economics can lead to travel programme policies which deliver a seamless booking and travel experience – while reducing traveller friction.

Why do people make the decisions they do?

Reduce traveller friction thanks to data insights

Behavioural Economics is a relatively new field that combines insights from psychology, judgment, decision making and economics to generate a more accurate understanding of human behaviour (Harvard Business Review 2017). Put simply, behavioural economics looks at how people make decisions about what they will buy and how much they will pay – and what factors drive these decisions.

In a corporate travel programme scenario, the decisions your travellers are making daily can have a significant impact not only on your organisation’s bottom line, but also on traveller wellbeing, productivity and morale. The good news is that a well-planned travel programme with solid policies, compliance and strategies in place can positively influence travellers to make better choices about their trips – thus increasing the travel programme's effectiveness.

By understanding behavioural economics, subtle changes to travel policies can be implemented to ‘nudge’ people to behave and choose in certain ways.

Decisions, decisions...

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According to Richard Thaler, Professor of Economics and Behavioural Science at the University of Chicago, one of the ways we can nudge people to help make better decisions is just to make the good decision easier (ABC, 2015). Thaler argues that this can be achieved by using default settings which encourage people to make wiser choices.

In the case of a travel programme, that might mean configuring a default setting that drives people to make the most cost-effective or time-effective choice, for example. Giving a traveller more options might sound like a positive way to give them more control, however sometimes this can become a negative.

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In business, time is money and the more options a traveller has can lead to time-consuming indecision – or decision paralysis. By designing booking tools to offer a limited number of options you can use behavioural economics to steer travellers towards your preferred choice.

One theory is that you can ‘nudge’ travellers by giving them a choice of three hotels, at three different price points, instead of two. This situation leads to the majority of people choosing the middle priced option, rather than the most expensive or the cheapest. This is called the decoy effect, when introducing a third decoy option can influence a person’s behaviour to choose the option you want.

Designing a travel programme to reduce traveller friction

Traveller friction

To change behaviours businesses need to first identify and understand the key problems or challenges travellers face. Then these insights into traveller friction can be used to tweak travel programmes to achieve better compliance and engagement – and to reduce the human cost of frequent travel.

Traveller friction can occur when business people are travelling too much or they are having poor travel experiences. The Procurement function plays a major role in reducing traveller friction through travel programme policies which help to avoid these ‘pain points’. As a result, travel managers have been placing greater importance on service levels and more-personalised experiences that keep travellers happier (and more productive) on the road and more engaged in their travel programmes.

MAIN SOURCES OF TRAVELLER FRICTION

Unclear travel programme policies

Travel policies that don’t factor in the human cost of travel or prioritise financial savings over traveller wellbeing

Poor approval processes

Policies that are too company-centric and not traveller-centric

Rigid and inflexible policies

Manual finance processing

Cumbersome or outdated booking processes

WARNING SIGNS OF TRAVELLER FRICTION

Frequent non-compliant travel bookings

Employee absence post-trip

Jetlag impacting productivity post-trip

Resistance or reluctance to travel

Unproductive trips

Poor employee retention among frequent travellers

Impact on employee wellbeing and family life

Travellers want simplicity...

biometric check-in

Also influencing behavioural economics is cultural behaviour. With complicated, demanding and time-poor lifestyles, simplicity is increasingly important for travellers. This is especially true of business travellers with hectic schedules who want to see travel streamlined.

Airline passengers now want the ability to use facial or fingerprint technology, to ease the process from booking flights to passing border control. A survey by the global airlines lobby found two-thirds of passengers wanted a single biometric identity token for all their travel transactions. The survey also found 82% of travellers wanted to be able to use a digital passport on their smartphones for as many travel activities as possible. It revealed 72% wanted to self-board aircraft and 68% wanted to selftag their bags, with electronic tags the preferred option.

The industry is listening, with the International Air Transport Association (IATA) having launched a project that is “rapidly moving travel towards a day when a face, iris or fingerprint will provide the key to a seamless travel experience”.

Connected consumers are connected travellers

It’s clear that digital access has altered all aspects of our working and personal lives. From shopping, to social interaction, entertainment, banking and fitness, connectivity drives the way we act, choose and spend. A travel programme that embraces opportunities to simplify the travel process through the adoption of these new technologies can reduce the stress on travellers.

Consumers are already showing a strong dependency on voice-activated digital assistants for basic search and query response functionality, as well as for scheduling, to help manage their increasingly overloaded, connected daily lives (Euromonitor, 2017).

Research has also shown that Millennials and Generation X (aged 40-44) have a strong interest in AI (Artificial Intelligence), and are comfortable using digital assistants on a daily or at least weekly basis. Further evidence of this trend is the increasing popularity and reliance on digital assistants, such as Siri or Cortana on smartphones. When it comes to travel booking, Chatbots are fulfilling this need and speeding up processes.

What business travellers really want...

PERSONALISATION

Choice, flexibility remain key for passengers

Technology enhances personal control

Increased automation of airport processes

Real-time travel updates direct to personal devices

More wi-fi connectivity on international flights

HOTEL TECHNOLOGY

Investment in ‘smart’ hotel rooms allowing guests to customise features to suit personal preferences

Mobile, voice-activated technology to operate entertainment systems, control temperatures and lighting

Expansion of robot delivery systems such as room service

Keyless check-in and wireless charging

What does the future hold?

While different technologies and innovations will continue to come and go, businesses around the world will increasingly strive to understand and predict human behaviour through the insights provided by behaviour economics.

Already governments, NGOs and businesses are routinely introducing policies that harness behavioural economics to drive change in areas including reducing carbon emissions, curbing obesity and building trust in vaccination programmes. In short, behavioural economics can be a very useful tool to drive positive behavioural change in your travel programme.

By achieving a frictionless booking and travelling experience, your business can reduce both the financial and human cost of your overall travel programme.

Contact us today to find out how FCM could help revolutinise your corporate travel programme.

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